Implications of Brexit for trade mark licensing in the European Union

In this bulletin, Bird & Bird IP partner Nick Aries considers what will happen to EU Trade Marks (EUTM) once Britain eventually withdraws from the EU.

On 23 June 2016, the UK public voted to leave the EU. The Supreme Court has decided that Parliamentary approval will be required to serve the formal notice required to leave. That approval is expected to be given but the notice period required means that the Brexit date is unlikely to be before 2019.

Once Brexit takes effect, how will unitary EU-wide registered IP rights, such as EUTMs, be addressed with regard to the UK, and what implications are there for EUTM licences?

Will my EUTM still cover the UK?

Once the UK leaves the EU, on the face of it EUTMs will only be enforceable in the UK if:

a new UK trade mark (UKTM) is created out of the existing EUTM, to cover the UK territory;

the EUTM regime is amended to permit non-EU Member States; or

the UK unilaterally decides to honour EUTMs as if the UK had remained in the EU.

The first of these options is thought to be the most likely. There are a number of matters for the UK government to consider during that process, including whether it should be automatic or voluntary, and whether it should be subject to payment of a fee. Furthermore, transitional provisions will need to be enacted to address matters including whether EUTMs which have only been used outside the UK shall continue to be valid within the UK; and whether EUTMs that have only been used in the UK shall continue to be valid in the rest of the EU.

One area of concern is what will happen to ongoing enforcement actions based on EUTMs when the UK leaves the EU. As the UK Courts will cease to be EUTM Courts when the UK leaves they will stop having jurisdiction over EUTMs. There is therefore uncertainty as to the status of any pending litigation and whether the UK Court will be able to grant remedies. It is likely there will be transitional provisions to deal with this situation but whether this is the case and what effect they will have is unclear.

It may therefore be sensible for licensors to file national UKTM applications now for their most important marks, to provide more certainty should it become necessary to commence enforcement action in the UK Courts prior to the leave date. If unopposed, a UK national application can proceed to registration within 4 months.

What about EUTM licences?

Of equal concern to licensors and licensees is what will happen to existing EUTM licences after Brexit, where the licenced territory includes the UK. Will the UK continue to be covered by the licence? And assuming a new national UKTM is created in each case to fill the gap left by an EUTM which no longer covers the UK, what are the consequences on existing EUTM licences covering the UK?

The remainder of this bulletin focusses on the implications of Brexit on EUTM licences. Various issues arise because the legal rules for licences of UKTMs differ from those covering EUTM licences. In particular, this is relevant for EUTM licences whose licensed territory is, or includes, the UK, and where no existing UK national marks are currently included in the licence.

Gateway Question: If an EUTM licence defines its territory as the 'European Union', would the UK continue to be part of the licensed territory post-Brexit?

There are competing arguments, and the answer will vary on a case by case basis.

Parties to existing licences ought to consider amending the licence, where necessary, to clarify the position.

Parties currently (re-)negotiating a licence ought to provide whether the term EU means "as constituted from time to time", or "as at the date of the agreement".

In each case, parties ought to contemplate other States joining or leaving the EU in future.

Assuming:

the territory of the existing EUTM licence does continue to include the UK,

a new UKTM is created out of the existing EUTM, to cover the UK, and

the licence covers that new UKTM (whether as a matter of contractual interpretation, or by virtue of specific transitional legislation);

then certain consequences follow because the legal rules governing licences of UKTMs differ in some respects from those governing EUTMs:

For example:

1. A licensor of a non-exclusive EUTM licence whose territory includes the UK should be aware that its licensee may have new rights post-Brexit to enforce the new UKTM against third parties than it had in relation to the EUTM:

The right to call on the licensor to bring infringement proceedings against third parties based on the new UKTM.

If the licensor fails to do that, the licensee could take action in its own right based on the UKTM.

Licensors are rightly wary of such rights, as such proceedings expose the trade mark to revocation/invalidity counterclaims and could impact on future enforcement.

The licensee will not have such rights where the parties have already included provisions to the contrary in the licence agreement. So:

A licensor currently (re-)negotiating an EUTM licence whose territory includes the UK ought to address how enforcement is dealt with, and seek to exclude these "enforcement" rights of the licensee.

For an existing EUTM licence whose territory includes the UK but that is not currently up for renegotiation, a licensor in a strong bargaining position should consider seeking to amend it to exclude these rights.

2. A licensor of an EUTM licence (exclusive or non-exclusive) whose territory includes the UK should be aware that it is possible to include wording to avoid having to pass on to its licensee any damages awarded for losses suffered by the licensee as a result of infringement of the new UKTM.

This is not a big enough point to warrant amending an existing licence which is not up for renegotiation, but if such a licence is currently being (re-)negotiated, the licensor should consider seeking to give effect to this exclusion.

3. A licence of a UKTM is only effective against a third party acquiring a conflicting interest (such as a party buying the UKTM, or a subsequent licensee whose rights conflict) if it has been registered at the UK IPO. The rights of a licensee to enforce the UKTM in its own name are also contingent on the licence having first been registered at the UK IPO.

A licensee of an EUTM licence whose territory includes the UK should seek to register the licence at the UK IPO as soon as the new UKTM deriving from the EUTM comes into existence.